The 60 Day Rule explained
Many of our readers are probably aware that Cypriot legislation states that individuals who spend more than 183 days during a tax year (the period from 1stJanuary until 31stDecember) in Cyprus are considered a Cyprus Tax Resident.
As of 1stJanuary 2017, however, the new 60-day rule can also be applied, which offers individuals the option to become a Cyprus tax resident after spending only 60 days in the country. This rule comes as an amendment to the initial, 183-day rule and provides an incentive to individuals seeking to change their tax residency to Cyprus, but at the same time continue living in a different jurisdiction for the majority of the year.
We answer some of the major questions surrounding the 60-day rule.
How does the 60-day rule apply?
This rule applies to individuals who, in the relevant tax year:
- Do not reside in any other country for a time period of more than 183 (collective) days
- Are not a tax resident in any other country
- Reside in Cyprus for at least 60 days
- Have additional Cyprus ties, including:
- Contract of employment
- Business ownership
- Being a director of a Cyprus Tax Resident company
All of the above must take place within a single tax year, and will not be considered valid in the case of termination of employment during said tax year. Additionally, the individual in question must maintain in the tax year a permanent residential property that is either owned or rented.
How is the 60-day rule calculated?
Both the 60-day rule and the 183-day rule are counted by days in and out of Cyprus, and calculated as follows:
- the day of departure from Cyprus counts as a day of residence outside Cyprus
- the day of arrival in Cyprus counts as a day of residence in Cyprus
- arrival and departure from Cyprus on the same day counts as one day of residence in Cyprus
- departure and arrival in Cyprus on the same day counts as one day of residence outside Cyprus
What are the advantages of being a Cyprus Tax Resident?
A Cyprus tax resident who is not domiciled in Cyprus for Cyprus tax purposes is exempt from taxation in Cyprus on his or her worldwide dividend or “passive” interest income.
Profit from the sale of securities, which include shares, bonds, debentures, options, etc., is exempt from taxation in Cyprus, except in cases where the value of the shares derives from immovable property located in Cyprus.
Employment Income Exemption
Fifty percent of remuneration from employment in Cyprus is exempt from income tax for the first 10 years, provided that the annual remuneration exceeds the amount of €100,000. This rule applies to individuals who were not tax residents prior to commencement of their employment.
Exemptions on income from employment outside of Cyprus
Individuals who are employed for more than 90 days aggregate in a tax year outside of Cyprus by a non-Cyprus tax resident employer or foreign permanent establishment of a Cyprus tax resident employer, are also exempted from income tax.
What additional steps do I need to take?
Individuals who satisfy the 60-day rule will need to take additional steps. These may include:
- registering as a tax resident with the Cyprus Tax Authorities
- considering whether the non-domicile rules apply to them
- obtaining and maintaining relevant evidence pertaining to the 60-day rule conditions (such as maintaining a permanent residential property in Cyprus)
- obtaining a Cyprus tax residency certificate (where required).